A refresher on the ACA’s tax penalty on individuals without health insurance

A refresher on the ACA’s tax penalty on individuals without health insurance

Now that Affordable Care Act (ACA) repeal and replacement efforts appear to have collapsed, at least for the time being, it’s a good time for a refresher on the tax penalty the ACA imposes on individuals who fail to have “minimum essential” health insurance coverage for any month of the year. This requirement is commonly called the “individual mandate.”
Penalty exemptions
Before we review how the penalty is calculated, let’s take a quick look at exceptions to the penalty. Taxpayers may be exempt if they fit into one of these categories for 2017:

Their household income is below the federal income tax return filing threshold.

They lack access to affordable minimum essential coverage.

They suffered a hardship in obtaining coverage.

They have only a short-term coverage gap.

They qualify for an exception on religious grounds or have coverage through a health care sharing ministry.

They’re not a U.S. citizen or national.

They’re incarcerated.

They’re a member of a Native American tribe.

Calculating the tax
So how much can the penalty cost? That’s a tricky question. If you owe the penalty, the tentative amount equals the greater of the following two prongs:

1. The applicable percentage of your household income above the applicable federal income tax return filing threshold, or

2. The applicable dollar amount times the number of uninsured individuals in your household, limited to 300% of the applicable dollar amount.